BRAZIL Law and Practice Contributed by: Mariana Cobra, Janaína Vargas, Mayara Zanini and Marcela Freire, Mattos Filho
during the term of the lease. Most of its provi - sions have the nature of public policy, and there - fore even if those provisions are not expressly included in the lease agreement, they must be observed by the parties. Any matter that is not covered by the Urban Lease Law may be lawfully negotiated. The parties may freely establish the monthly rent amount, which must be in Reais. There is no material ongoing regulation of rents or lease terms that resulted from the COVID-19 pandemic. • Length of lease term: there are no statutory restrictions concerning the length of lease agreements in Brazil. A non-residential lease agreement that has a minimum five-year term may be renewed for five years at the discre - tion of the tenant. If the landlord refuses to renew the lease, the tenant may initiate legal proceedings (renewal action) within one year, but no less than six months, of the expiration of the lease to request the court to grant the renewal. • Maintenance and repair of the leased real estate: the tenant is responsible for maintain - ing the premises on good repair, order and the other conditions present at the start of the lease, except for regular wear and tear. The landlord is responsible for repairs or con - struction works related to the building struc - ture of the leased premises. • Frequency of rent payments: there are no statutory restrictions concerning the frequen - cy of rent payments in Brazil. It is common practice to establish monthly payments. How - ever, monthly rent cannot be paid in advance, except if the tenant does not provide any 6.4 Typical Terms of a Lease Typical Urban Lease Agreements
security for the payment of rent under the lease agreement. • COVID-19 pandemic issues: parties are now providing better definitions of force majeure in lease agreements and, in some cases, specific penalties in the case of early termi - nation of the lease due to situations such as pandemics. 6.5 Rent Variation Every 12 months, rent may be adjusted by a legally accepted inflation index provided in the lease agreement. For typical urban lease agreements, rent can be reviewed every 36 months to be adjusted to market rates. 6.6 Determination of New Rent If the rent is to be changed or increased, the new rent will be determined by mutual agreement, by hiring an appraiser or judicially. 6.7 Payment of VAT Value-added tax on sales of goods and services (ICMS) is a state tax levied, among other events, on the sale and on the import of goods. How - ever, it is not applicable to real estate rent. In general, rent revenue stream recognised by Brazilian companies is subject to monthly taxa - tion: Social Integration Program (PIS) and Social Security Funding Contribution (COFINS), except for companies subject to the cumulative regime whose purpose is not to lease real estate. The Brazilian Consumption Tax Reform enacted on 20 December 2023, introduced a new taxa - tion framework, replacing several taxes (includ - ing ISS, ICMS, PIS and COFINS) with three new ones (IBS, CBS and IS), set to transition from 2026 to 2033. Specifically, PIS and COFINS will
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